Correlation Between PCCW and New World
Can any of the company-specific risk be diversified away by investing in both PCCW and New World at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PCCW and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PCCW Limited and New World Development, you can compare the effects of market volatilities on PCCW and New World and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PCCW with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of PCCW and New World.
Diversification Opportunities for PCCW and New World
Significant diversification
The 3 months correlation between PCCW and New is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding PCCW Limited and New World Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Development and PCCW is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PCCW Limited are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Development has no effect on the direction of PCCW i.e., PCCW and New World go up and down completely randomly.
Pair Corralation between PCCW and New World
Assuming the 90 days horizon PCCW Limited is expected to generate 0.51 times more return on investment than New World. However, PCCW Limited is 1.97 times less risky than New World. It trades about 0.04 of its potential returns per unit of risk. New World Development is currently generating about 0.01 per unit of risk. If you would invest 47.00 in PCCW Limited on September 5, 2024 and sell it today you would earn a total of 5.00 from holding PCCW Limited or generate 10.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PCCW Limited vs. New World Development
Performance |
| Timeline |
| PCCW Limited |
| New World Development |
PCCW and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PCCW and New World
The main advantage of trading using opposite PCCW and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PCCW position performs unexpectedly, New World can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in New World will offset losses from the drop in New World's long position.| PCCW vs. Telenor ASA ADR | PCCW vs. Hellenic Telecommunications Org | PCCW vs. Orange SA ADR | PCCW vs. Telefonica SA ADR |
| New World vs. Henderson Land Development | New World vs. Sun Hung Kai | New World vs. Hang Lung Properties | New World vs. Swire Pacific |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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